NASDAQ:AKAM Akamai Technologies Q2 2025 Earnings Report $74.76 +0.28 (+0.38%) Closing price 08/7/2025 04:00 PM EasternExtended Trading$77.15 +2.39 (+3.20%) As of 08/7/2025 07:59 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. ProfileEarnings HistoryForecast Akamai Technologies EPS ResultsActual EPS$1.73Consensus EPS $1.55Beat/MissBeat by +$0.18One Year Ago EPS$1.58Akamai Technologies Revenue ResultsActual Revenue$1.04 billionExpected Revenue$1.02 billionBeat/MissBeat by +$22.86 millionYoY Revenue Growth+6.50%Akamai Technologies Announcement DetailsQuarterQ2 2025Date8/7/2025TimeAfter Market ClosesConference Call DateThursday, August 7, 2025Conference Call Time4:30PM ETConference Call ResourcesConference Call AudioConference Call TranscriptPress Release (8-K)Earnings HistoryCompany ProfilePowered by Akamai Technologies Q2 2025 Earnings Call TranscriptProvided by QuartrAugust 7, 2025 ShareLink copied to clipboard.Key Takeaways Positive Sentiment: Company reported Q2 revenue of $1.043 billion (up 7% yoy) and non-GAAP EPS of $1.73 (up 9% yoy), exceeding guidance on revenue, margin, and EPS. Positive Sentiment: Cloud Infrastructure Services (CIS) revenue grew 30% yoy to $71 million, with management projecting 40–45% ARR growth by year-end as large deals ramp. Positive Sentiment: Security segment revenue rose 11% yoy to $552 million, driven by market-leading Guardicore micro-segmentation and API security solutions, with API and Zero Trust up 48%. Neutral Sentiment: Delivery revenue declined 3% yoy to $320 million but showed sequential improvements in traffic growth and pricing, and management expects mid-single-digit declines moving toward stabilization. Positive Sentiment: Q3 guidance raised to $1.035–1.05 billion in revenue (up 3–4% yoy) and full-year 2025 revenue to $4.135–4.205 billion, with non-GAAP EPS of $6.60–6.80. AI Generated. May Contain Errors.Conference Call Audio Live Call not available Earnings Conference CallAkamai Technologies Q2 202500:00 / 00:00Speed:1x1.25x1.5x2xThere are 13 speakers on the call. Operator00:00:00Good day, and welcome to the Second Quarter twenty twenty five Akamai Technologies Incorporated Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask question. To ask a question, you may press star then 1 on a touch tone phone. To withdraw your question, please press star then 2. Operator00:00:30Please note this event is being recorded. I would now like to turn the conference over to Mark Suttenberg, Head of Investor Relations. Please go ahead. Speaker 100:00:41Thanks, and good afternoon, everyone, and thank you for joining Akamai's second quarter twenty twenty five earnings call. Speaking today will be Tom Layton, Akamai's Chief Executive Officer and Ed McGowan, Akamai's Chief Financial Officer. Please note that today's comments include forward looking statements, including those regarding revenue and earnings guidance. These forward looking statements are based on current expectations and assumptions that are subject to certain risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied. The factors include, but are not limited to, any impact from macroeconomic trends, the integration of any acquisition, geopolitical developments, and other risk factors identified in our filings with the SEC. Speaker 100:01:33The statements included on today's call represent the company's views on 08/07/2025, and we assume no obligation to update any forward looking statements. As a reminder, we will be referring to certain non GAAP financial metrics during today's call. A detailed reconciliation of GAAP to non GAAP metrics can be found under the financial portion of the Investor Relations section of akamai.com. With that, I'll now hand the call off to our CEO, Doctor. Tom Leighton. Speaker 200:02:07Thanks, Mark. I'm pleased to report that Akamai had an excellent second quarter with results coming in above our guidance for revenue, margin and earnings per share. Revenue grew to $1,043,000,000 up 7% year over year as reported and up 6% in constant currency. Non GAAP operating margin was 30%. And non GAAP earnings per share came in at $1.73 up 9% year over year as reported and in constant currency, and $0.15 above the high end of our guidance range. Speaker 200:02:42Our strong performance was enabled by the stabilization of revenue from our delivery product line, combined with the solid growth of our security and compute product lines, as we continue to reposition Akamai to take advantage of the tailwinds in these markets and the substantial opportunities associated with AI. I'm especially excited about the growth and opportunity we're seeing for our cloud infrastructure services portfolio. CIS revenue in Q2 was $71,000,000 percent year over year as reported and 29% in constant currency. We're projecting even faster growth throughout the remainder of the year as we start recognizing revenue from some large deals signed earlier this year. As a reminder, our cloud infrastructure services portfolio consists of the compute and storage solutions that we've developed based on Linode, along with our Edge Workers product and the ISV solutions running on our cloud platform. Speaker 200:03:45It's the high growth portion of our cloud computing product line, and it's where we're focusing our investments. Our rapid growth in cloud infrastructure services is driven in part by our customers' desire to get their compute instances closer to end users for improved scalability and performance, and by their need to reduce cost. This is particularly true for new Gen AI applications, which are increasingly being used to drive real time decisions, shape user experiences, and power operations. To attract and retain customers, businesses are developing a variety of AI based apps and agents for personalization, support, search, inference and other tasks. Akamai's globally distributed platform spanning more than 4,300 points of presence across 130 countries offers unique advantages for deploying such AI applications, bringing business logic and data to within milliseconds of end users globally and operating at a scale that provides a petabyte per second of throughput capacity. Speaker 200:04:56Already, customers have deployed AI powered applications on Akamai Cloud for tasks such as image classification, image optimization, speech to text and speech to image, chatbots, inference engines, virtual fitting rooms, to name a few. Last month, we introduced our new AI gateway solution to customers at an event in London. This new solution is designed to address three of the biggest challenges that businesses encounter when they deploy large language models. AI that's too slow, too vulnerable to attack, and too expensive to run at scale. AI gateway acts as a smart traffic controller that sits between users and the AI services deployed by our customers. Speaker 200:05:40So now, instead of every AI request having to travel all the way to a centralized server, Akamai makes it possible to handle many of these requests closer to the user at the edge. Moving AI closer to the action makes each interaction faster, makes our customers' systems more energy and cost efficient, and ultimately allows our customers to deliver a vastly better experience for their users. The edge is also where Akamai deploys our security solutions, including our new firewall for AI that fights prompt abuse and model compromise, as well as our bot and abuse solutions that help our publishing customers monetize their content by monitoring and controlling access by AI scraper bots. AI gateway and firewall for AI are prime examples of how we're bringing our expertise at the edge to the cloud to make AI faster, more secure, and significantly more affordable. There are also good examples of the synergy between our new cloud computing capabilities and our security and delivery product lines, as customers buy cloud computing from Akamai alongside security and delivery. Speaker 200:06:54Examples of the many contracts we signed in Q2 that included a large commit for our cloud infrastructure services are a three year 16,000,000 renewal and expansion agreement with one of the largest companies at the forefront of the AI revolution, a two year $28,000,000 agreement with one of the world's leading travel companies, a three year $18,000,000 deal with a leading internet platform in South Korea, a $19,000,000 deal with an Internet company in Japan, and a three year $10,000,000 agreement with one of the world's leading media companies. Turning now to security. Security growth was driven in part by the continued strong demand for our market leading Guardicore segmentation solution, as more enterprises relied on Akamai to meet compliance requirements and to defend against ransomware and data exfiltration malware. Ransomware remains a top financial and reputational risk for enterprises, as illustrated by the highly publicized attacks that took down several major retailers in Q2. According to news reports, one attack in April on a British retailer impacted operations for at least three months, costing the company an estimated $400,000,000 in lost revenue. Speaker 200:08:13And a retailer in The US reported $20,000,000 in lost sales when a cyber attack took down its e commerce platform during their Memorial Day weekend sale. In a world where attacks are finding new ways to penetrate traditional perimeter defenses, segmentation is the last and most important line of defense for major enterprises. And our market leading segmentation solution is making a big difference for our customers. With our sophisticated threat intelligence, we've detected a wide variety of malicious ransomware attacks on commerce companies. And customers who use our segmentation solution were able to identify these attacks and protect themselves from operational harm and financial loss. Speaker 200:08:57In fact, Akamai is the only vendor to be named customer favorite in the new Forrester Wave Zero Trust Platforms report, receiving perfect scores in three categories: segmentation and control, pricing flexibility, and supporting services. Our segmentation wins in Q2 included a $9,000,000 contract for Gardacor with one of the world's leading consumer and commercial insurance providers after Akamai demonstrated the fastest time to policy across their on prem, AWS, and Azure environments. A $5,000,000 contract with one of the world's largest financial services companies that selected Gardacor after struggling to modernize their environment for Zero Trust to protect aging networks for which they had no visibility. And a $3,000,000 contract, two thirds of which is for Gardacor with one of Japan's leading financial institutions. Wins in other industries included deals with a leading manufacturer in The US, a major steel producer in Asia, and a large holding company in Latin America. Speaker 200:10:04In Q2, we also continued to see strong interest in our market leading API security solution, which earned Akamai recognition as a leader in Kuppinger Cole's Leadership Compass API Security and Management Report released last month. Our API security solution combines very well with our market leading WAF and bot management solutions to provide a compelling platform for app and API protection for major enterprises. Major API security wins last quarter included a $15,000,000 agreement with one of North America's largest real estate fintech companies, which included $2,000,000 for API security. A $4,000,000 expansion contract with one of the largest managed care organizations in North America, which included $2,000,000 for API security. A $2,300,000 agreement with one of the largest life insurance providers in India, which included $1,400,000 for the protection of their API ecosystem, as they migrated away from their previous provider. Speaker 200:11:09And a $20,000,000 five year contract renewal with one of the leading fashion and home retailers in Europe that included seven Akamai security solutions in addition to compute and delivery. We're very pleased to see customers increasingly utilize the full breadth of our security platform across applications, APIs, infrastructure, and enterprise zero trust security. We believe this illustrates the strength of Akamai security defenses, the depth of our threat intelligence and our close relationships with enterprise customers who rely on us as a strategic partner in security, helping them consolidate their security spending with a major vendor they trust most to protect their businesses and reputations. Before I turn the call over to Ed, I'd like to say a few words of welcome to the two new directors on Akamai's board, Janaki Akela and Boss Berger. Janaki has held several executive roles at Google, including as lead for digital transformation for Google Cloud and chief of business operations. Speaker 200:12:17Prior to that, she was a partner at McKinsey and Company. She brings deep expertise in cloud computing, cybersecurity, and AI, as well as general management and strategy consulting experience. Boss Berger is the CEO of BT International, the division of The UK telco company that delivers global data, voice, security and cloud connectivity solutions to multinational organizations. Boss brings expertise in leading complex global organizations, executing go to market initiatives focused on driving customer acquisition, retention and expansion, and building strategic partnerships with major technology infrastructure and cybersecurity providers. Their insights and counsel will be invaluable to us as we continue to innovate and expand our cloud computing and cybersecurity offerings and advance our go to market transformation to best capture future growth opportunities. Speaker 200:13:17Now I'll turn the call over to Ed to say more on our Q2 results and our outlook for the rest of the year. Ed? Speaker 300:13:25Thank you, Tom. As Tom just mentioned, we delivered very solid second quarter results with total Q2 revenue of $1,043,000,000 which was up 7% year over year as reported and 6% in constant currency. We also had another quarter of very strong bottom line performance, with non GAAP EPS outperforming our guidance range by $0.15 This strong non GAAP EPS performance was driven by a combination of higher than expected revenue, lower than expected bandwidth costs, higher interest income related to the convertible debt issuance in May, and lower share count as a result of our stock buyback activity in the first half of the year. It's also worth noting that we received an unusually high amount of bandwidth and colocation credits during the quarter, resulting in a one time positive benefit of approximately $5,000,000 to gross margin in the second quarter. Moving now to revenue. Speaker 300:14:26Compute revenue was $171,000,000 up 13% year over year as reported and in constant currency. Compute revenue was driven by continued strength in our cloud infrastructure services, or CIS. CIS revenue was $71,000,000 up 30% year over year as reported and 29% in constant currency. As Tom noted, we expect the growth rate of our CIS business to accelerate throughout the rest of this year and into next year, driven by some large contracts signed earlier this year that will start generating revenue late this year and into 2026 and beyond. We continue to expect CIS ARR year over year growth in the range of 40% to 45% in constant currency at the end of the year. Speaker 300:15:16Revenue from other cloud applications, or OCA, was $100,000,000 up 4% year over year as reported and up 3% in constant currency. As we mentioned on our Q4 call in February, OCA includes many of our more mature compute products, such as Image and Video Manager, Cloudlets, and Legacy NetStorage. We expect the revenue from OCA to remain relatively flat quarter over quarter for the rest of this year. However, as a result of a $7,000,000 onetime benefit included in Q3 twenty twenty four's results, we anticipate that the year over year revenue growth rate for OCA will take a one time dip in Q3. As a reminder, this one time benefit was related to the release of some deferred revenue in conjunction with the expiration of a long term legacy compute contract. Speaker 300:16:11Putting this all together, we remain very excited about our opportunities for compute. Based on the timing of revenue recognition for the larger deals I mentioned earlier, our compute growth for 2025 could be a little less than our goal of approximately 15% in constant currency for the full year. Security revenue was $552,000,000 up 11% year over year as reported and 10% in constant currency. Within security, the combined revenue for API security and Zero Trust enterprise security was $67,000,000 up 48% year over year as reported, and 49% in constant currency. These results include approximately $8,000,000 of inorganic revenue from No Name. Speaker 300:16:58Excluding this inorganic contribution, year over year revenue growth would have been approximately 32%. We continue to expect security revenue growth of approximately 10% in constant currency in 2025, and we continue to expect the combined ARR for our Zero Trust enterprise and API security solutions to increase by 30% to 35% year over year in constant currency for 2025. Delivery revenue was $320,000,000 down 3% year over year as reported and down 4% in constant currency, well above our expectations. We're very encouraged by the continued improvements in both pricing and traffic growth we observed during the first half of the year. International revenue was $516,000,000 up 10% year over year or 8% in constant currency, representing 49% of our total revenue in Q2. Speaker 300:17:53US foreign exchange fluctuations had a positive impact on revenue of $17,000,000 on a sequential basis and a positive $8,000,000 impact on a year over year basis. Moving now to profitability. In Q2, we generated non GAAP net income of $251,000,000 or $1.73 of earnings per diluted share, up 9% year over year as reported and in constant currency and $0.15 above the high end Speaker 400:18:20of our guidance range based on the items I mentioned earlier. Speaker 300:18:24Finally, our Q2 CapEx was $214,000,000 or 21% of revenue. Moving to cash and our capital allocation strategy. As of June 30, our cash, cash equivalents and marketable securities totaled approximately $1,600,000,000 As a reminder, during the second quarter, we used cash on hand and funds available under our revolving credit facility to fully repay $1,150,000,000 of our outstanding convertible senior notes that matured on 05/01/2025. Following this repayment, we issued $1,725,000,000 in senior convertible notes with the maturity date of 05/15/2033, and with a coupon of 25 basis points. As Speaker 400:19:08part Speaker 300:19:08of the offering, we incurred net cost of $275,000,000 from note hedging and warrant transactions while concurrently spending 300,000,000 on stock buybacks. It's worth noting that in the second quarter, we used approximately $250,000,000 of the proceeds from this offering to pay off prior borrowings on our revolving credit facility. The net proceeds of approximately $900,000,000 from this offering have been invested in highly liquid marketable securities, currently yielding approximately 4% on a weighted average basis. As it relates to return of capital, as I just mentioned, we spent approximately $300,000,000 to buy back approximately 3,900,000.0 shares during the second quarter. We ended the second quarter with approximately $1,200,000,000 remaining on our current repurchase authorization. Speaker 300:19:57Year to date, we spent $800,000,000 to buy back approximately 10,000,000 shares. Going forward, our intention remains the same, to continue buying back shares to offset dilution from employee equity programs over time and to be opportunistic in both M and A and share repurchases when market and business conditions warrant. Before I provide our Q3 and full year 2025 guidance, I want to touch on some housekeeping items. First, despite initial concerns, the likelihood of a complete TikTok ban in The U. S. Speaker 300:20:27Appears to be less likely. With this in mind, we are now including domestic revenue from TikTok in our Q3 and full year 2025 revenue guidance. Second, regarding compute revenue. As I mentioned earlier, last year's Q3 results included a onetime 7,000,000 benefit that will not reoccur in Q3 twenty twenty five. Third, as it relates to gross margin, we are projecting an increase in colocation and related costs starting in Q3, as we anticipate additional compute capacity coming online during the quarter. Speaker 300:21:02This will result in roughly a one percentage point increase in cost of revenue in Q3 compared to Q2. In addition, for our qualified compute partner sales, or QCPs, we occasionally bundle third party products as part of a total solution for customers. In certain situations, we must record the gross revenue from these sales and the associated costs. The gross margin on the partner resales is typically lower than our company gross margin. Therefore, as qualified compute partner revenue increases, we expect it will lower our overall gross margin. Speaker 300:21:37We anticipate the sales of QCP partner solutions will impact gross margins by approximately 70 basis points this year. It's worth noting the primary advantage of working with QCP partners is their solutions do help drive additional higher margin CIS revenue. Fourth, as we previously discussed, we are investing to strengthen our go to market approach. We're increasing our sales rep hunting capacity to be more proactive in finding and securing new business, and we're adding experienced specialists to help support the sales of our new security and compute products. In addition, we're also growing our channel organization to expand our partnerships and open up potential new revenue growth opportunities. Speaker 300:22:21These investments are crucial to our long term success, but it will take time for the incremental headcount to ramp and start delivering results. As a result, we anticipate that our operating margin in the second half of the year will be lower than in the first half. Finally, on 07/04/2025, President Trump signed into law the One Big Beautiful Bill Act. The act includes significant provisions such as the permanent extension of certain existing provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions. The new legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. Speaker 300:23:07We are in the process of evaluating the act, but we do not expect it will have a material impact on our tax rate in 2025. So with those factors in mind, I'll move to our Q3 guidance. For Q3, we are projecting revenue in the range of 1,035,000,000.000 to $1,050,000,000 or up 3% to 4% as reported and up 2% to 4% in constant currency over Q3 twenty twenty four. At current spot rates, foreign exchange fluctuations are expected to have a positive $3,000,000 impact on Q3 revenue compared to Q2 levels and a positive $6,000,000 impact year over year. At these revenue levels, we expect cash gross margins of approximately 72% to 73%. Speaker 300:23:50Q3 non GAAP operating expenses are projected to be $327,000,000 to $332,000,000 We expect Q3 EBITDA margin of approximately 41%. We expect non GAAP depreciation expense to be between 139,000,000 to $141,000,000 and we expect non GAAP operating margin of approximately 28% for Q3. Moving on to CapEx. We expect to spend approximately $227,000,000 to $237,000,000 This represents approximately 22% of our projected total revenue. Based on our expectations for revenue and costs, we expect Q3 non GAAP EPS in the range of $1.62 to $1.66 This non GAAP EPS guidance assumes taxes of $54,000,000 to $55,000,000 based on an estimated quarterly non GAAP tax rate of approximately 19%. Speaker 300:24:39It also reflects a fully diluted share count of approximately 145,000,000 shares. Turning to the full year. For 2025, we now expect revenue of $4,135,000,000 to $4,205,000,000 which is up 4% to 5% as reported and 3% to 5% in constant currency. At current spot rates, our guidance assumes foreign exchange will have a positive $13,000,000 impact on revenue in 2025 on a year over year basis. For 2025, we're estimating non GAAP operating margin of approximately 29% as measured in today's FX rates. Speaker 300:25:15We anticipate that our full year CapEx will be approximately 20% of total revenue. And for the full year 2025, we expect non GAAP earnings per diluted share in the range of $6.6 to $6.8 This non GAAP earnings guidance is based on a non GAAP effective tax rate of approximately 19% and a fully diluted share count of approximately 147,000,000 shares. In closing, we're very encouraged by our strong first half financial performance marked by solid results across both the top and bottom lines. With that, I'll wrap things up, and Tom and I are happy to take your questions. Operator? Operator00:25:55Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If are using a speakerphone, please pick up your handset before pressing the keys. If at any time a question has been addressed and you would like to withdraw your question, please press star then 2. Operator00:26:18At this time, we will pause momentarily to assemble a roster. The first question comes from Mike Sikos with Needham and Co. Please go ahead. Speaker 500:26:38Hey, guys. Thanks for taking the question here. Just wanted to come back to some earlier Speaker 600:26:42comments on the financials, but I know that we have the the updated view on compute. Can you just walk us through how the first half of the year transpired versus expectations and and why we're indicating how calendar 'twenty five could finish up some of this targeted fifteen percent that we've been talking to? Speaker 200:27:00Yes, I'll take the first pass at that. You know, so far this year, compute, and particularly, you know, cloud infrastructure services where we're focused and seeing really great growth, you know, is exceeding meeting and exceeding expectations. You know, we've signed a large number of customers at significant revenue. We are in a position, depending on when that revenue starts getting recognized towards the end of the year, would impact what our overall compute revenue would be for the year, but we do forecast 40% to 45% growth in ARR on a full year basis by year end. So a significant acceleration from where we are today, which is already doing extremely well at 30% growth on a number that, you know, is almost a 300,000,000 ARR. Speaker 200:27:50Ed, do you wanna add anything to that? Speaker 300:27:54Yeah. I think you covered it, Tom. I mean, it really just comes down to some of the large deals that were signed this year when they actually turn into revenue. So if it's a month or two late in terms of when the customers ramp up, that may potentially land revenue slightly below 15%. I think the big key takeaway here is that we feel very confident with the business that we've signed up that we're on a significant acceleration path for CIS revenue. Speaker 600:28:20Great. Thank you very much. Operator00:28:26The next question comes from the line of John with Guggenheim. Please go ahead. Speaker 700:28:34Hey, everyone. This is Lawrence Fenskell on for John DiFucci. Just wanted to quickly touch on the delivery business. So you guys have been clear about the headwinds that you've been seeing for some time now, but it seems like the last two quarters, we've been ahead of where the street was expecting it to be. So if we think about the competitive environment pre pandemic and where it is now, do you think you're seeing an incremental benefit from the exit of some of your CDN peers in recent years and some of which that you've acquired assets from? Speaker 700:29:01And is this just an improvement in trends? And is this a sustainable improvement in trends? Any color there would be very helpful. Thank you. Speaker 200:29:08Yes. There's a substantial difference in the competitive landscape pre pandemic and today. Four of our biggest competitors pre pandemic are gone. And we did pick up the contracts, the ones that we wanted from those customers. We've done a good job upselling and cross selling there. Speaker 200:29:28On top of that, the traffic trends overall, I think are improving and we're seeing that. So you get a combination of a little bit, better pricing environment. It's still competitive, of course, but not in a crazy way it was as, you know, as four companies were on their death throes, you know, just offering any price at all to get some business. And so as we look forward, as Ed talked about, we're looking at mid single digits declines. And over the longer term, we want it to be stable and steady and not see declines there. Speaker 700:30:06Got it. That's helpful and clear. Thank you. Operator00:30:11The next question comes from Fatima Boolani with Citi. Please go ahead. Speaker 800:30:17Hey. Good afternoon, team. This is Mark on for Fatima. Thanks for taking the question. Maybe just want to touch on CIS again. Speaker 800:30:24Just in regards to the large contracts, you guys signed this early this year. Can you give a sense of the contract structure? Are there minimum commitments or firm demand that you see in the pipe that's really given conviction for on the second half growth acceleration? Just seems like, obviously, there's a big healthy ramp here to get to the 45% AR target. Thanks. Speaker 300:30:46Yeah, hey, is Ed. I'll take that one, Tom. So there's a number of different contracts that were signed. We've announced a couple of them, and both of the two largest ones have minimum commitments. And there is a ramp to the revenue throughout the year. Speaker 300:31:01And as we had said at the beginning of the year, we did expect this to be revenue later in the year. And now we've got, you know, better line of sight to it. But, you know, a lot of it depends on how quickly the customer will move the application and ramp it up. So we do have, like I said, very high confidence level in that revenue. There's three or four really large contracts that have been signed, all which have commitments. Speaker 300:31:25We feel pretty good about that. Speaker 800:31:28Great. And maybe just a follow-up. Does the 40% to 45% ARR growth target assume only the minimum commitment? Or what's sort of the building blocks here? Speaker 300:31:38Yes. So the way we define the ARR, just to make it simple for investors to follow, is we just take the Q4 times four as an ARR proxy. So, it wouldn't be the minimum commit necessarily. It would be whatever revenue that we were generating from those contracts within the particular quarter in Q4. Speaker 900:31:58Great. Thank you. Operator00:32:05The next question comes from Frank Cloughton with Raymond James. Please go ahead. Speaker 1000:32:13Great. Thank you. Speaker 900:32:13Can you us insight into the guide and to what extent is the uptick in the guide coming from including TikTok for the rest of the year? And then as a follow-up, the subdivision on the compute, can you maybe give us a little more color on what's going on in the part of that business besides Linode that's growing a little bit less? Thanks. Speaker 300:32:37Yes, sure. So in terms of the guidance, as we've disclosed for a while now, what The US revenue from TikTok is, it's about $40,000,000 40,000,000 to $50,000,000 So you can assume about half of that roughly given that we're giving guidance for the back half of the year is in the number. So as you can tell, the midpoint of the guide is up much more than that. So there's more to it than just the TikTok increase. It's really kind of strength across the board. Speaker 300:33:05And then your other question was in terms of the other cloud applications. If you go back to the last call we had where we talked about the other cloud applications and sort of broke it out for you, broke it into the different categories, image management, video management, the legacy net storage, cloudless apps, etcetera. There's a number of things going on underneath that business, some of which we are transferring some of that business to compute partners of ours in exchange for large commitments back on compute side. And then we go to market with those particular partners. So that's going to start to come off over time, say over the next twelve to eighteen months. Speaker 300:33:47Legacy NetStorage, we have a legacy platform. We had disclosed that number of around $50,000,000 on an annualized basis. We've got a new storage platform in node and computes part of the business and the CIS business. So, we're going to be end of lifing that business and that business will hopefully migrate over to CIS. As it does, we'll let you know. Speaker 300:34:07So we're not expecting a lot of growth. It is still growing. It's growing at 3% to 4%. But we're expecting that some of that revenue to decline over time just in line with what we had said in the past. Speaker 900:34:23So of that amount that you're sending over to partners, can you quantify that? What is the total amount of that that's set to be transferred? Speaker 300:34:31Yes. So we haven't disclosed that. It's not overly significant. It's a smaller percentage of that total of the roughly $100,000,000 Speaker 900:34:41Okay, great. Thank you. Operator00:34:46The next question comes from Jackson Ader with KeyBanc Capital Markets. Please go ahead. Great. Speaker 1100:34:53Good evening, guys. Thanks for taking our question. Speaker 700:34:55I wanted Speaker 1100:34:56to just follow-up on two things regarding those large CIS contracts. Ed, you mentioned a couple of times, it kind of depends on when the customer moves the application over. I'm just curious, like how much visibility do you actually have or maybe control do you have in the movement of those applications? Are they waiting on Akamai to ready anything, to do anything? Or is it really all in the customer's court? Speaker 300:35:22Yes, it really depends on the particular customer. For example, with one of the larger contracts that we signed, there was a particular application that they had planned to move later in the year that was dependent on us building out some capacity. So as you think about my prepared remarks, we talked about adding some capacity in a location that wasn't in our initial plans to build, but we did build for that. So there was something that we did have to do. With other customers, generally, there's a period of time where they're running a proof of concept. Speaker 300:35:53Oftentimes, they'll have their own windows in which they want to move things. It could be a moratorium on their own end where they don't wanna move a particular application during a particular busy time, etcetera. So it really does depend. So I'd I'd sort of break it out this way. There were some things that we had to to do, and we're on schedule to perform all of our obligations. Speaker 300:36:12And then the rest is really just up to the customer. We do have a lot of communication back and forth with the customer have pretty good line of sight, but there's no guarantee that a customer is going to move exactly when you say they will. The good news is we're very confident with the overall size of the contract and we think these contracts have upside to them. It's just really a question of exactly what month are we going to start to recognize revenue. Speaker 1100:36:34Got it. Okay. And then a quick follow-up. You mentioned how Speaker 1000:36:39to make some investments maybe on the Speaker 1100:36:40go to market side to try and drive a little bit more of these CIS contracts. Curious what the pipeline looks like heading into the second half for those. Thank you. Speaker 300:36:52You're about the pipeline for CIS or just the pipeline in general? Speaker 1100:36:57For CIS specifically but if you want to answer in general too that would be great. Thanks. Speaker 300:37:02Yes sure. Yeah, so the pipeline for CIS is growing and it's we're seeing a couple of different things there. One, we're seeing participation from all across different verticals and different geographies, which is good. And we are seeing some some of our larger customers coming back with newer applications. So a little bit of the existing customer growth as well as a lot of new logo growth. Speaker 300:37:26And also, the size of some of these deals are larger than what we typically see in our security and our delivery business, which good as well. So I'd say it's a very healthy pipeline and continues to grow. And just across the business, I'd say it's fairly normal in terms of what we're seeing from a pipeline perspective. But the only call out that I would make is API security in particular is extremely strong. We're seeing very, very healthy growth in API security and a lot of demand for API security, especially with our web application firewall customers. Speaker 300:37:58It's a very natural upsell motion. So we're starting to see that pipeline grow significantly and a lot of deals come in as a result as well. Speaker 1100:38:07All right. Awesome. Thank you very much. Operator00:38:10The next question comes from Jonathan Ho with William Blair and Company. Please go ahead. Speaker 500:38:18Hi. Good afternoon. I wanted to follow-up on that last comment around the security business. Can you maybe speak to what's driving the demand for both API and micro segmentation security? And maybe why are we not seeing stronger security revenue growth? Speaker 500:38:35I know there's some legacy security components that are tied to delivery, but just wanted to maybe parse this a little bit and help us understand how the other two segments are performing. Speaker 200:38:47Yeah. You know, there's a lot of greenfield in, both, API security and micro segmentation. And, you know, customers are now realizing they need to have security solutions there. You know, most major enterprises, literally a thousands of APIs exposed, and they don't have a good handle on what they are and what the vulnerabilities are, and that's we provide, the visibility and also the security. We have the market leading solution to do that, and so there is a lot of demand. Speaker 200:39:23You know, the same thing for micro segmentation, in some sense, more important. You know, the attack rates have gone up, the successful penetrations have gone up quite a bit, the damage from ransomware, as we talked about on the call, is extraordinary, incredibly expensive, And again, we've got the market leading solution with Gardacor. And so we are seeing very strong demand there and strong growth. Off of a nontrivial number, you know, we're looking at 30 to 35%, you know, ARR growth coming off, you know, over a quarter billion ending last year. And so, yeah, good reasons for the demand. Speaker 200:40:04And, of course, you think about the impact of Gen AI, one of the sort of bad impacts in general is that it really aids the attackers. And so I think that's part of why you're seeing so many more penetrations today. And micro segmentation is your last and best line of defense, and we've got an exceptional track record of protecting our customers there. And so I think that's why you're seeing the growth. Now, those are, you know, decent sized products now growing rapidly, but the overall security number, you know, running now at about 2,200,000,000.0, has a very large component from, you know, web app firewall, you know, our Prolexic DDoS solution, bot management, you know, WAF and and the scrubbing solutions have been, you know, out there for a while. Speaker 200:40:54They are growing, but at a slower rate. And so you have a slower rate of growth on, you know, a good sized chunk of the 2,200,000,000. And so that's why you don't, you know, see security as a whole growing, you know, at 20 or 30%. You know, it's growing in double digits, but, you know, we're we're looking more like 10% for now. Now, as you see API security and micro segmentation get bigger, then that 30% plus growth rate has more of an impact on the whole number. Speaker 500:41:29Great. And maybe just as a follow-up, with your AI commentary, what kind of opportunity are you seeing there? And how do your solutions maybe compare with some of your major competitors, you know, that are, you know, really focusing on, you know, AI security and infrastructure? Thank you. Speaker 200:41:46Yeah. So, you know, we have a leading capability. It's very early days, of course, you know, for AI firewall. Now, of course, the first thing, there's a lot of new applications out there which need regular security protection, API security and web app firewall. And so that's helping, you know, certainly the AI security business. Speaker 200:42:05But a firewall AI in particular needs extra firewall capabilities to keep adversaries from successful prompt injection attacks, to keep the AI from doing something that it's not supposed to do. And so we developed a a very compelling capability there, just released. It's very early to market. And, you know, very good interest, you know, strong dozens of, you know, proofs of concept underway now and very positive customer feedback. And so it's really kind of it's unique in in the marketplace to protect the customer facing, the user facing AI application against those kinds of attacks. Operator00:42:52The next question comes from Sanjit Singh with Morgan Stanley. Please go ahead. Speaker 1000:42:59Hi, guys. This is John Eisensen on for Sanjit. Thank you for taking my question. Great to see the solid results this quarter. And sorry if I missed this, but can you talk about the how much Edgeo contributed to your revenue in the quarter and how that's tracking relative to the 85,000,000 to $105,000,000 range you gave previously? Speaker 1000:43:21Thank you. Speaker 200:43:22Yes, this is Ed. Speaker 300:43:23So we it gets a lot harder to track the exact contribution from Edge O just given that there is a lot of customer overlap. So as you have some of your larger customers that are growing, see we saw a great traffic growth in video and software download, which drove upside in traffic. Hard to say how much of that's related to Edgeo versus what's related to Akamai. But I would say in general, the Edgeo acquisition is tracking just as we had hoped. And obviously, the category of overall delivery is doing better. Speaker 300:43:53So you could probably assume we're doing a little bit better kind of on the higher end of that range perhaps. But we're also starting to see some upsell of some of the new customer logos that we acquired as well. So I would say the thesis that we had in doing that acquisition is playing out just like we had hoped. We are seeing better trends in the industry, as Tom mentioned, both with pricing and with traffic growth. So again, I don't have an exact number for you because it gets very hard to track the exact number, but I'd say it's tracking along just as we had hoped, maybe even a little bit better. Speaker 1000:44:26Understood. Very helpful. Thank you. Operator00:44:30The next question comes from Jeff Van with Craig Hallum. Please go ahead. Speaker 1200:44:37Hey, Tom, Ed. This is Daniel Hibschman on for Jeff Van Rhee. Just on the delivery, another great quarter and another question on that. Just to set the stage, I think on delivery, we haven't had a sequential growth quarter other than obviously Q4 is show growth seasonally, but we haven't had outside of Q4 is a sequential growth quarter since as I see Q2 twenty twenty. So now Q1 twenty twenty five, Q2 twenty twenty five, we had two sequential growth quarters. Speaker 1200:45:09Really great to see that trajectory very, very different from what we've seen for years and trying to understand a little bit better. I mean, I assume on Q1 twenty twenty five, you have a full quarter of AGEO. So that's the driver. But for this quarter, is there anything about AGEO leading into Q2 inorganically that's benefiting the quarter? I mean, in terms of the market landscape in a really a more significant way to call out? Speaker 1200:45:35Or is this something onetime about what we're seeing here? Speaker 300:45:39Yeah. So I'd say it's a couple of things. One, it's not an NGO onetime item or anything like that because you're correct. By we migrated that traffic very, very quickly. That was one of the benefits of that. Speaker 300:45:50We were able to migrate that over very, very quickly in the first quarter. Actually, January, we were or mid January, we're done. So you don't have any sort of inorganic contribution per se related to Edgeo. The really the if I look at the traffic growth that was surprising to us, it was higher than expected and not quite back to the, you know, what we used to see sort of pre pandemic, but much healthier traffic growth. And it was across a couple different verticals. Speaker 300:46:20And I called out software downloaded video. Video is the biggest category of traffic. So that was good to see. And then we do track a pricing metric where we look at our overall pricing as a whole. We get our traffic revenue over our, you know, our overall traffic and that has continued to moderate. Speaker 300:46:40It's still declining as Tom mentioned, but it's not declining as rapidly as it has. And those are the two ingredients you need for a healthier delivery business. So, you know, it could be, you know, just the industry in general is going through, you know, a better time in terms of, you know, popularity of content, that sort of thing. There is a little bit less competition out there now, obviously. But I'd say it's more of a healthier market than we've seen in the last, say, year or two. Speaker 1000:47:10Thanks, Ed. Operator00:47:14The next question comes from Rudy Kissinger with D. A. Davidson. Please go ahead. Speaker 400:47:22Hi. Thanks for taking my question. This is Andres Miranda for Rudy. I just have a quick one. What would have been compute revenue growth if we adjust for the headwind from the legacy compute revenue that you guys transfer to partners? Speaker 400:47:36Is that something you can quantify for this quarter? Speaker 300:47:40Yes. So it wouldn't make a significant difference. Because if you look at just an aggregate, we broke that revenue out for you at the end of the year. It's down slightly. So it would have a very minimal impact. Speaker 400:47:53Sounds good. Thank you. Operator00:48:01Thank you. This concludes our question and answer session. The conference now has concluded. Thank you for attending today's presentation. You may now disconnect. Operator00:48:11Thank you.Read morePowered by Earnings DocumentsPress Release(8-K) Akamai Technologies Earnings HeadlinesAkamai Technologies, Inc. (AKAM) Q2 2025 Earnings Call TranscriptAugust 7 at 8:04 PM | seekingalpha.comAKAMAI REPORTS SECOND QUARTER 2025 FINANCIAL RESULTSAugust 7 at 4:01 PM | prnewswire.comHe Called Nvidia at $1.10. Now, He Says THIS Stock Will…The original Magnificent Seven returned 16,894%—turning $7K into $1.18 million. Now, the man who called Nvidia at $1.10 reveals AI’s Next Magnificent Seven… including one stock he says could become America’s next trillion-dollar giant. | The Oxford Club (Ad)Akamai Technologies (NASDAQ:AKAM) Lowered to "Underweight" Rating by Morgan StanleyAugust 7 at 2:55 AM | americanbankingnews.comAkamai Technologies Partners With Aqua Security to Deliver AI-Powered Integrated SolutionAugust 1, 2025 | insidermonkey.comRansomware is on the rise, thanks in part to GenAIJuly 31, 2025 | finance.yahoo.comSee More Akamai Technologies Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Akamai Technologies? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Akamai Technologies and other key companies, straight to your email. Email Address About Akamai TechnologiesAkamai Technologies (NASDAQ:AKAM) provides cloud computing, security, and content delivery services in the United States and internationally. The company offers cloud solutions to keep infrastructure, websites, applications, application programming interfaces, and users safe from various cyberattacks and online threats while enhancing performance. It also provides web and mobile performance solutions to enable dynamic websites and applications; media delivery solutions, including video streaming and video player services, game and software delivery, broadcast operations, authoritative domain name system, resolution, and data and analytics; and cloud computing services, such as compute, storage, networking, database, and container management services to build, deploy, and secure applications and workloads. In addition, the company offers content delivery solutions; and an array of service and support to assist customers with integrating, configuring, optimizing, and managing its offerings. It sells its solutions through various channel partners. Akamai Technologies, Inc. was incorporated in 1998 and is headquartered in Cambridge, Massachusetts.View Akamai Technologies ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Constellation Energy’s Earnings Beat Signals a New EraRealty Income Rallies Post-Earnings Miss—Here’s What Drove ItDon't Mix the Signal for Noise in Super Micro Computer's EarningsWhy Monolithic Power's Earnings and Guidance Ignited a RallyRivian Takes Earnings Hit—R2 Could Be the Stock's 2026 LifelinePalantir Stock Soars After Blowout Earnings ReportVertical Aerospace's New Deal and Earnings De-Risk Production Upcoming Earnings SEA (8/12/2025)Cisco Systems (8/13/2025)Alibaba Group (8/13/2025)Applied Materials (8/14/2025)NetEase (8/14/2025)Deere & Company (8/14/2025)NU (8/14/2025)Petroleo Brasileiro S.A.- Petrobras (8/14/2025)Palo Alto Networks (8/18/2025)Home Depot (8/19/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. Start Your 30-Day Trial MarketBeat All Access Features Best-in-Class Portfolio Monitoring Get personalized stock ideas. Compare portfolio to indices. Check stock news, ratings, SEC filings, and more. Stock Ideas and Recommendations See daily stock ideas from top analysts. Receive short-term trading ideas from MarketBeat. Identify trending stocks on social media. Advanced Stock Screeners and Research Tools Use our seven stock screeners to find suitable stocks. Stay informed with MarketBeat's real-time news. Export data to Excel for personal analysis. Sign in to your free account to enjoy these benefits In-depth profiles and analysis for 20,000 public companies. Real-time analyst ratings, insider transactions, earnings data, and more. Our daily ratings and market update email newsletter. Sign in to your free account to enjoy all that MarketBeat has to offer. Sign In Create Account Your Email Address: Email Address Required Your Password: Password Required Log In or Sign in with Facebook Sign in with Google Forgot your password? Your Email Address: Please enter your email address. Please enter a valid email address Choose a Password: Please enter your password. Your password must be at least 8 characters long and contain at least 1 number, 1 letter, and 1 special character. Create My Account (Free) or Sign in with Facebook Sign in with Google By creating a free account, you agree to our terms of service. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
There are 13 speakers on the call. Operator00:00:00Good day, and welcome to the Second Quarter twenty twenty five Akamai Technologies Incorporated Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask question. To ask a question, you may press star then 1 on a touch tone phone. To withdraw your question, please press star then 2. Operator00:00:30Please note this event is being recorded. I would now like to turn the conference over to Mark Suttenberg, Head of Investor Relations. Please go ahead. Speaker 100:00:41Thanks, and good afternoon, everyone, and thank you for joining Akamai's second quarter twenty twenty five earnings call. Speaking today will be Tom Layton, Akamai's Chief Executive Officer and Ed McGowan, Akamai's Chief Financial Officer. Please note that today's comments include forward looking statements, including those regarding revenue and earnings guidance. These forward looking statements are based on current expectations and assumptions that are subject to certain risks and uncertainties and involve a number of factors that could cause actual results to differ materially from those expressed or implied. The factors include, but are not limited to, any impact from macroeconomic trends, the integration of any acquisition, geopolitical developments, and other risk factors identified in our filings with the SEC. Speaker 100:01:33The statements included on today's call represent the company's views on 08/07/2025, and we assume no obligation to update any forward looking statements. As a reminder, we will be referring to certain non GAAP financial metrics during today's call. A detailed reconciliation of GAAP to non GAAP metrics can be found under the financial portion of the Investor Relations section of akamai.com. With that, I'll now hand the call off to our CEO, Doctor. Tom Leighton. Speaker 200:02:07Thanks, Mark. I'm pleased to report that Akamai had an excellent second quarter with results coming in above our guidance for revenue, margin and earnings per share. Revenue grew to $1,043,000,000 up 7% year over year as reported and up 6% in constant currency. Non GAAP operating margin was 30%. And non GAAP earnings per share came in at $1.73 up 9% year over year as reported and in constant currency, and $0.15 above the high end of our guidance range. Speaker 200:02:42Our strong performance was enabled by the stabilization of revenue from our delivery product line, combined with the solid growth of our security and compute product lines, as we continue to reposition Akamai to take advantage of the tailwinds in these markets and the substantial opportunities associated with AI. I'm especially excited about the growth and opportunity we're seeing for our cloud infrastructure services portfolio. CIS revenue in Q2 was $71,000,000 percent year over year as reported and 29% in constant currency. We're projecting even faster growth throughout the remainder of the year as we start recognizing revenue from some large deals signed earlier this year. As a reminder, our cloud infrastructure services portfolio consists of the compute and storage solutions that we've developed based on Linode, along with our Edge Workers product and the ISV solutions running on our cloud platform. Speaker 200:03:45It's the high growth portion of our cloud computing product line, and it's where we're focusing our investments. Our rapid growth in cloud infrastructure services is driven in part by our customers' desire to get their compute instances closer to end users for improved scalability and performance, and by their need to reduce cost. This is particularly true for new Gen AI applications, which are increasingly being used to drive real time decisions, shape user experiences, and power operations. To attract and retain customers, businesses are developing a variety of AI based apps and agents for personalization, support, search, inference and other tasks. Akamai's globally distributed platform spanning more than 4,300 points of presence across 130 countries offers unique advantages for deploying such AI applications, bringing business logic and data to within milliseconds of end users globally and operating at a scale that provides a petabyte per second of throughput capacity. Speaker 200:04:56Already, customers have deployed AI powered applications on Akamai Cloud for tasks such as image classification, image optimization, speech to text and speech to image, chatbots, inference engines, virtual fitting rooms, to name a few. Last month, we introduced our new AI gateway solution to customers at an event in London. This new solution is designed to address three of the biggest challenges that businesses encounter when they deploy large language models. AI that's too slow, too vulnerable to attack, and too expensive to run at scale. AI gateway acts as a smart traffic controller that sits between users and the AI services deployed by our customers. Speaker 200:05:40So now, instead of every AI request having to travel all the way to a centralized server, Akamai makes it possible to handle many of these requests closer to the user at the edge. Moving AI closer to the action makes each interaction faster, makes our customers' systems more energy and cost efficient, and ultimately allows our customers to deliver a vastly better experience for their users. The edge is also where Akamai deploys our security solutions, including our new firewall for AI that fights prompt abuse and model compromise, as well as our bot and abuse solutions that help our publishing customers monetize their content by monitoring and controlling access by AI scraper bots. AI gateway and firewall for AI are prime examples of how we're bringing our expertise at the edge to the cloud to make AI faster, more secure, and significantly more affordable. There are also good examples of the synergy between our new cloud computing capabilities and our security and delivery product lines, as customers buy cloud computing from Akamai alongside security and delivery. Speaker 200:06:54Examples of the many contracts we signed in Q2 that included a large commit for our cloud infrastructure services are a three year 16,000,000 renewal and expansion agreement with one of the largest companies at the forefront of the AI revolution, a two year $28,000,000 agreement with one of the world's leading travel companies, a three year $18,000,000 deal with a leading internet platform in South Korea, a $19,000,000 deal with an Internet company in Japan, and a three year $10,000,000 agreement with one of the world's leading media companies. Turning now to security. Security growth was driven in part by the continued strong demand for our market leading Guardicore segmentation solution, as more enterprises relied on Akamai to meet compliance requirements and to defend against ransomware and data exfiltration malware. Ransomware remains a top financial and reputational risk for enterprises, as illustrated by the highly publicized attacks that took down several major retailers in Q2. According to news reports, one attack in April on a British retailer impacted operations for at least three months, costing the company an estimated $400,000,000 in lost revenue. Speaker 200:08:13And a retailer in The US reported $20,000,000 in lost sales when a cyber attack took down its e commerce platform during their Memorial Day weekend sale. In a world where attacks are finding new ways to penetrate traditional perimeter defenses, segmentation is the last and most important line of defense for major enterprises. And our market leading segmentation solution is making a big difference for our customers. With our sophisticated threat intelligence, we've detected a wide variety of malicious ransomware attacks on commerce companies. And customers who use our segmentation solution were able to identify these attacks and protect themselves from operational harm and financial loss. Speaker 200:08:57In fact, Akamai is the only vendor to be named customer favorite in the new Forrester Wave Zero Trust Platforms report, receiving perfect scores in three categories: segmentation and control, pricing flexibility, and supporting services. Our segmentation wins in Q2 included a $9,000,000 contract for Gardacor with one of the world's leading consumer and commercial insurance providers after Akamai demonstrated the fastest time to policy across their on prem, AWS, and Azure environments. A $5,000,000 contract with one of the world's largest financial services companies that selected Gardacor after struggling to modernize their environment for Zero Trust to protect aging networks for which they had no visibility. And a $3,000,000 contract, two thirds of which is for Gardacor with one of Japan's leading financial institutions. Wins in other industries included deals with a leading manufacturer in The US, a major steel producer in Asia, and a large holding company in Latin America. Speaker 200:10:04In Q2, we also continued to see strong interest in our market leading API security solution, which earned Akamai recognition as a leader in Kuppinger Cole's Leadership Compass API Security and Management Report released last month. Our API security solution combines very well with our market leading WAF and bot management solutions to provide a compelling platform for app and API protection for major enterprises. Major API security wins last quarter included a $15,000,000 agreement with one of North America's largest real estate fintech companies, which included $2,000,000 for API security. A $4,000,000 expansion contract with one of the largest managed care organizations in North America, which included $2,000,000 for API security. A $2,300,000 agreement with one of the largest life insurance providers in India, which included $1,400,000 for the protection of their API ecosystem, as they migrated away from their previous provider. Speaker 200:11:09And a $20,000,000 five year contract renewal with one of the leading fashion and home retailers in Europe that included seven Akamai security solutions in addition to compute and delivery. We're very pleased to see customers increasingly utilize the full breadth of our security platform across applications, APIs, infrastructure, and enterprise zero trust security. We believe this illustrates the strength of Akamai security defenses, the depth of our threat intelligence and our close relationships with enterprise customers who rely on us as a strategic partner in security, helping them consolidate their security spending with a major vendor they trust most to protect their businesses and reputations. Before I turn the call over to Ed, I'd like to say a few words of welcome to the two new directors on Akamai's board, Janaki Akela and Boss Berger. Janaki has held several executive roles at Google, including as lead for digital transformation for Google Cloud and chief of business operations. Speaker 200:12:17Prior to that, she was a partner at McKinsey and Company. She brings deep expertise in cloud computing, cybersecurity, and AI, as well as general management and strategy consulting experience. Boss Berger is the CEO of BT International, the division of The UK telco company that delivers global data, voice, security and cloud connectivity solutions to multinational organizations. Boss brings expertise in leading complex global organizations, executing go to market initiatives focused on driving customer acquisition, retention and expansion, and building strategic partnerships with major technology infrastructure and cybersecurity providers. Their insights and counsel will be invaluable to us as we continue to innovate and expand our cloud computing and cybersecurity offerings and advance our go to market transformation to best capture future growth opportunities. Speaker 200:13:17Now I'll turn the call over to Ed to say more on our Q2 results and our outlook for the rest of the year. Ed? Speaker 300:13:25Thank you, Tom. As Tom just mentioned, we delivered very solid second quarter results with total Q2 revenue of $1,043,000,000 which was up 7% year over year as reported and 6% in constant currency. We also had another quarter of very strong bottom line performance, with non GAAP EPS outperforming our guidance range by $0.15 This strong non GAAP EPS performance was driven by a combination of higher than expected revenue, lower than expected bandwidth costs, higher interest income related to the convertible debt issuance in May, and lower share count as a result of our stock buyback activity in the first half of the year. It's also worth noting that we received an unusually high amount of bandwidth and colocation credits during the quarter, resulting in a one time positive benefit of approximately $5,000,000 to gross margin in the second quarter. Moving now to revenue. Speaker 300:14:26Compute revenue was $171,000,000 up 13% year over year as reported and in constant currency. Compute revenue was driven by continued strength in our cloud infrastructure services, or CIS. CIS revenue was $71,000,000 up 30% year over year as reported and 29% in constant currency. As Tom noted, we expect the growth rate of our CIS business to accelerate throughout the rest of this year and into next year, driven by some large contracts signed earlier this year that will start generating revenue late this year and into 2026 and beyond. We continue to expect CIS ARR year over year growth in the range of 40% to 45% in constant currency at the end of the year. Speaker 300:15:16Revenue from other cloud applications, or OCA, was $100,000,000 up 4% year over year as reported and up 3% in constant currency. As we mentioned on our Q4 call in February, OCA includes many of our more mature compute products, such as Image and Video Manager, Cloudlets, and Legacy NetStorage. We expect the revenue from OCA to remain relatively flat quarter over quarter for the rest of this year. However, as a result of a $7,000,000 onetime benefit included in Q3 twenty twenty four's results, we anticipate that the year over year revenue growth rate for OCA will take a one time dip in Q3. As a reminder, this one time benefit was related to the release of some deferred revenue in conjunction with the expiration of a long term legacy compute contract. Speaker 300:16:11Putting this all together, we remain very excited about our opportunities for compute. Based on the timing of revenue recognition for the larger deals I mentioned earlier, our compute growth for 2025 could be a little less than our goal of approximately 15% in constant currency for the full year. Security revenue was $552,000,000 up 11% year over year as reported and 10% in constant currency. Within security, the combined revenue for API security and Zero Trust enterprise security was $67,000,000 up 48% year over year as reported, and 49% in constant currency. These results include approximately $8,000,000 of inorganic revenue from No Name. Speaker 300:16:58Excluding this inorganic contribution, year over year revenue growth would have been approximately 32%. We continue to expect security revenue growth of approximately 10% in constant currency in 2025, and we continue to expect the combined ARR for our Zero Trust enterprise and API security solutions to increase by 30% to 35% year over year in constant currency for 2025. Delivery revenue was $320,000,000 down 3% year over year as reported and down 4% in constant currency, well above our expectations. We're very encouraged by the continued improvements in both pricing and traffic growth we observed during the first half of the year. International revenue was $516,000,000 up 10% year over year or 8% in constant currency, representing 49% of our total revenue in Q2. Speaker 300:17:53US foreign exchange fluctuations had a positive impact on revenue of $17,000,000 on a sequential basis and a positive $8,000,000 impact on a year over year basis. Moving now to profitability. In Q2, we generated non GAAP net income of $251,000,000 or $1.73 of earnings per diluted share, up 9% year over year as reported and in constant currency and $0.15 above the high end Speaker 400:18:20of our guidance range based on the items I mentioned earlier. Speaker 300:18:24Finally, our Q2 CapEx was $214,000,000 or 21% of revenue. Moving to cash and our capital allocation strategy. As of June 30, our cash, cash equivalents and marketable securities totaled approximately $1,600,000,000 As a reminder, during the second quarter, we used cash on hand and funds available under our revolving credit facility to fully repay $1,150,000,000 of our outstanding convertible senior notes that matured on 05/01/2025. Following this repayment, we issued $1,725,000,000 in senior convertible notes with the maturity date of 05/15/2033, and with a coupon of 25 basis points. As Speaker 400:19:08part Speaker 300:19:08of the offering, we incurred net cost of $275,000,000 from note hedging and warrant transactions while concurrently spending 300,000,000 on stock buybacks. It's worth noting that in the second quarter, we used approximately $250,000,000 of the proceeds from this offering to pay off prior borrowings on our revolving credit facility. The net proceeds of approximately $900,000,000 from this offering have been invested in highly liquid marketable securities, currently yielding approximately 4% on a weighted average basis. As it relates to return of capital, as I just mentioned, we spent approximately $300,000,000 to buy back approximately 3,900,000.0 shares during the second quarter. We ended the second quarter with approximately $1,200,000,000 remaining on our current repurchase authorization. Speaker 300:19:57Year to date, we spent $800,000,000 to buy back approximately 10,000,000 shares. Going forward, our intention remains the same, to continue buying back shares to offset dilution from employee equity programs over time and to be opportunistic in both M and A and share repurchases when market and business conditions warrant. Before I provide our Q3 and full year 2025 guidance, I want to touch on some housekeeping items. First, despite initial concerns, the likelihood of a complete TikTok ban in The U. S. Speaker 300:20:27Appears to be less likely. With this in mind, we are now including domestic revenue from TikTok in our Q3 and full year 2025 revenue guidance. Second, regarding compute revenue. As I mentioned earlier, last year's Q3 results included a onetime 7,000,000 benefit that will not reoccur in Q3 twenty twenty five. Third, as it relates to gross margin, we are projecting an increase in colocation and related costs starting in Q3, as we anticipate additional compute capacity coming online during the quarter. Speaker 300:21:02This will result in roughly a one percentage point increase in cost of revenue in Q3 compared to Q2. In addition, for our qualified compute partner sales, or QCPs, we occasionally bundle third party products as part of a total solution for customers. In certain situations, we must record the gross revenue from these sales and the associated costs. The gross margin on the partner resales is typically lower than our company gross margin. Therefore, as qualified compute partner revenue increases, we expect it will lower our overall gross margin. Speaker 300:21:37We anticipate the sales of QCP partner solutions will impact gross margins by approximately 70 basis points this year. It's worth noting the primary advantage of working with QCP partners is their solutions do help drive additional higher margin CIS revenue. Fourth, as we previously discussed, we are investing to strengthen our go to market approach. We're increasing our sales rep hunting capacity to be more proactive in finding and securing new business, and we're adding experienced specialists to help support the sales of our new security and compute products. In addition, we're also growing our channel organization to expand our partnerships and open up potential new revenue growth opportunities. Speaker 300:22:21These investments are crucial to our long term success, but it will take time for the incremental headcount to ramp and start delivering results. As a result, we anticipate that our operating margin in the second half of the year will be lower than in the first half. Finally, on 07/04/2025, President Trump signed into law the One Big Beautiful Bill Act. The act includes significant provisions such as the permanent extension of certain existing provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions. The new legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. Speaker 300:23:07We are in the process of evaluating the act, but we do not expect it will have a material impact on our tax rate in 2025. So with those factors in mind, I'll move to our Q3 guidance. For Q3, we are projecting revenue in the range of 1,035,000,000.000 to $1,050,000,000 or up 3% to 4% as reported and up 2% to 4% in constant currency over Q3 twenty twenty four. At current spot rates, foreign exchange fluctuations are expected to have a positive $3,000,000 impact on Q3 revenue compared to Q2 levels and a positive $6,000,000 impact year over year. At these revenue levels, we expect cash gross margins of approximately 72% to 73%. Speaker 300:23:50Q3 non GAAP operating expenses are projected to be $327,000,000 to $332,000,000 We expect Q3 EBITDA margin of approximately 41%. We expect non GAAP depreciation expense to be between 139,000,000 to $141,000,000 and we expect non GAAP operating margin of approximately 28% for Q3. Moving on to CapEx. We expect to spend approximately $227,000,000 to $237,000,000 This represents approximately 22% of our projected total revenue. Based on our expectations for revenue and costs, we expect Q3 non GAAP EPS in the range of $1.62 to $1.66 This non GAAP EPS guidance assumes taxes of $54,000,000 to $55,000,000 based on an estimated quarterly non GAAP tax rate of approximately 19%. Speaker 300:24:39It also reflects a fully diluted share count of approximately 145,000,000 shares. Turning to the full year. For 2025, we now expect revenue of $4,135,000,000 to $4,205,000,000 which is up 4% to 5% as reported and 3% to 5% in constant currency. At current spot rates, our guidance assumes foreign exchange will have a positive $13,000,000 impact on revenue in 2025 on a year over year basis. For 2025, we're estimating non GAAP operating margin of approximately 29% as measured in today's FX rates. Speaker 300:25:15We anticipate that our full year CapEx will be approximately 20% of total revenue. And for the full year 2025, we expect non GAAP earnings per diluted share in the range of $6.6 to $6.8 This non GAAP earnings guidance is based on a non GAAP effective tax rate of approximately 19% and a fully diluted share count of approximately 147,000,000 shares. In closing, we're very encouraged by our strong first half financial performance marked by solid results across both the top and bottom lines. With that, I'll wrap things up, and Tom and I are happy to take your questions. Operator? Operator00:25:55Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your touch tone phone. If are using a speakerphone, please pick up your handset before pressing the keys. If at any time a question has been addressed and you would like to withdraw your question, please press star then 2. Operator00:26:18At this time, we will pause momentarily to assemble a roster. The first question comes from Mike Sikos with Needham and Co. Please go ahead. Speaker 500:26:38Hey, guys. Thanks for taking the question here. Just wanted to come back to some earlier Speaker 600:26:42comments on the financials, but I know that we have the the updated view on compute. Can you just walk us through how the first half of the year transpired versus expectations and and why we're indicating how calendar 'twenty five could finish up some of this targeted fifteen percent that we've been talking to? Speaker 200:27:00Yes, I'll take the first pass at that. You know, so far this year, compute, and particularly, you know, cloud infrastructure services where we're focused and seeing really great growth, you know, is exceeding meeting and exceeding expectations. You know, we've signed a large number of customers at significant revenue. We are in a position, depending on when that revenue starts getting recognized towards the end of the year, would impact what our overall compute revenue would be for the year, but we do forecast 40% to 45% growth in ARR on a full year basis by year end. So a significant acceleration from where we are today, which is already doing extremely well at 30% growth on a number that, you know, is almost a 300,000,000 ARR. Speaker 200:27:50Ed, do you wanna add anything to that? Speaker 300:27:54Yeah. I think you covered it, Tom. I mean, it really just comes down to some of the large deals that were signed this year when they actually turn into revenue. So if it's a month or two late in terms of when the customers ramp up, that may potentially land revenue slightly below 15%. I think the big key takeaway here is that we feel very confident with the business that we've signed up that we're on a significant acceleration path for CIS revenue. Speaker 600:28:20Great. Thank you very much. Operator00:28:26The next question comes from the line of John with Guggenheim. Please go ahead. Speaker 700:28:34Hey, everyone. This is Lawrence Fenskell on for John DiFucci. Just wanted to quickly touch on the delivery business. So you guys have been clear about the headwinds that you've been seeing for some time now, but it seems like the last two quarters, we've been ahead of where the street was expecting it to be. So if we think about the competitive environment pre pandemic and where it is now, do you think you're seeing an incremental benefit from the exit of some of your CDN peers in recent years and some of which that you've acquired assets from? Speaker 700:29:01And is this just an improvement in trends? And is this a sustainable improvement in trends? Any color there would be very helpful. Thank you. Speaker 200:29:08Yes. There's a substantial difference in the competitive landscape pre pandemic and today. Four of our biggest competitors pre pandemic are gone. And we did pick up the contracts, the ones that we wanted from those customers. We've done a good job upselling and cross selling there. Speaker 200:29:28On top of that, the traffic trends overall, I think are improving and we're seeing that. So you get a combination of a little bit, better pricing environment. It's still competitive, of course, but not in a crazy way it was as, you know, as four companies were on their death throes, you know, just offering any price at all to get some business. And so as we look forward, as Ed talked about, we're looking at mid single digits declines. And over the longer term, we want it to be stable and steady and not see declines there. Speaker 700:30:06Got it. That's helpful and clear. Thank you. Operator00:30:11The next question comes from Fatima Boolani with Citi. Please go ahead. Speaker 800:30:17Hey. Good afternoon, team. This is Mark on for Fatima. Thanks for taking the question. Maybe just want to touch on CIS again. Speaker 800:30:24Just in regards to the large contracts, you guys signed this early this year. Can you give a sense of the contract structure? Are there minimum commitments or firm demand that you see in the pipe that's really given conviction for on the second half growth acceleration? Just seems like, obviously, there's a big healthy ramp here to get to the 45% AR target. Thanks. Speaker 300:30:46Yeah, hey, is Ed. I'll take that one, Tom. So there's a number of different contracts that were signed. We've announced a couple of them, and both of the two largest ones have minimum commitments. And there is a ramp to the revenue throughout the year. Speaker 300:31:01And as we had said at the beginning of the year, we did expect this to be revenue later in the year. And now we've got, you know, better line of sight to it. But, you know, a lot of it depends on how quickly the customer will move the application and ramp it up. So we do have, like I said, very high confidence level in that revenue. There's three or four really large contracts that have been signed, all which have commitments. Speaker 300:31:25We feel pretty good about that. Speaker 800:31:28Great. And maybe just a follow-up. Does the 40% to 45% ARR growth target assume only the minimum commitment? Or what's sort of the building blocks here? Speaker 300:31:38Yes. So the way we define the ARR, just to make it simple for investors to follow, is we just take the Q4 times four as an ARR proxy. So, it wouldn't be the minimum commit necessarily. It would be whatever revenue that we were generating from those contracts within the particular quarter in Q4. Speaker 900:31:58Great. Thank you. Operator00:32:05The next question comes from Frank Cloughton with Raymond James. Please go ahead. Speaker 1000:32:13Great. Thank you. Speaker 900:32:13Can you us insight into the guide and to what extent is the uptick in the guide coming from including TikTok for the rest of the year? And then as a follow-up, the subdivision on the compute, can you maybe give us a little more color on what's going on in the part of that business besides Linode that's growing a little bit less? Thanks. Speaker 300:32:37Yes, sure. So in terms of the guidance, as we've disclosed for a while now, what The US revenue from TikTok is, it's about $40,000,000 40,000,000 to $50,000,000 So you can assume about half of that roughly given that we're giving guidance for the back half of the year is in the number. So as you can tell, the midpoint of the guide is up much more than that. So there's more to it than just the TikTok increase. It's really kind of strength across the board. Speaker 300:33:05And then your other question was in terms of the other cloud applications. If you go back to the last call we had where we talked about the other cloud applications and sort of broke it out for you, broke it into the different categories, image management, video management, the legacy net storage, cloudless apps, etcetera. There's a number of things going on underneath that business, some of which we are transferring some of that business to compute partners of ours in exchange for large commitments back on compute side. And then we go to market with those particular partners. So that's going to start to come off over time, say over the next twelve to eighteen months. Speaker 300:33:47Legacy NetStorage, we have a legacy platform. We had disclosed that number of around $50,000,000 on an annualized basis. We've got a new storage platform in node and computes part of the business and the CIS business. So, we're going to be end of lifing that business and that business will hopefully migrate over to CIS. As it does, we'll let you know. Speaker 300:34:07So we're not expecting a lot of growth. It is still growing. It's growing at 3% to 4%. But we're expecting that some of that revenue to decline over time just in line with what we had said in the past. Speaker 900:34:23So of that amount that you're sending over to partners, can you quantify that? What is the total amount of that that's set to be transferred? Speaker 300:34:31Yes. So we haven't disclosed that. It's not overly significant. It's a smaller percentage of that total of the roughly $100,000,000 Speaker 900:34:41Okay, great. Thank you. Operator00:34:46The next question comes from Jackson Ader with KeyBanc Capital Markets. Please go ahead. Great. Speaker 1100:34:53Good evening, guys. Thanks for taking our question. Speaker 700:34:55I wanted Speaker 1100:34:56to just follow-up on two things regarding those large CIS contracts. Ed, you mentioned a couple of times, it kind of depends on when the customer moves the application over. I'm just curious, like how much visibility do you actually have or maybe control do you have in the movement of those applications? Are they waiting on Akamai to ready anything, to do anything? Or is it really all in the customer's court? Speaker 300:35:22Yes, it really depends on the particular customer. For example, with one of the larger contracts that we signed, there was a particular application that they had planned to move later in the year that was dependent on us building out some capacity. So as you think about my prepared remarks, we talked about adding some capacity in a location that wasn't in our initial plans to build, but we did build for that. So there was something that we did have to do. With other customers, generally, there's a period of time where they're running a proof of concept. Speaker 300:35:53Oftentimes, they'll have their own windows in which they want to move things. It could be a moratorium on their own end where they don't wanna move a particular application during a particular busy time, etcetera. So it really does depend. So I'd I'd sort of break it out this way. There were some things that we had to to do, and we're on schedule to perform all of our obligations. Speaker 300:36:12And then the rest is really just up to the customer. We do have a lot of communication back and forth with the customer have pretty good line of sight, but there's no guarantee that a customer is going to move exactly when you say they will. The good news is we're very confident with the overall size of the contract and we think these contracts have upside to them. It's just really a question of exactly what month are we going to start to recognize revenue. Speaker 1100:36:34Got it. Okay. And then a quick follow-up. You mentioned how Speaker 1000:36:39to make some investments maybe on the Speaker 1100:36:40go to market side to try and drive a little bit more of these CIS contracts. Curious what the pipeline looks like heading into the second half for those. Thank you. Speaker 300:36:52You're about the pipeline for CIS or just the pipeline in general? Speaker 1100:36:57For CIS specifically but if you want to answer in general too that would be great. Thanks. Speaker 300:37:02Yes sure. Yeah, so the pipeline for CIS is growing and it's we're seeing a couple of different things there. One, we're seeing participation from all across different verticals and different geographies, which is good. And we are seeing some some of our larger customers coming back with newer applications. So a little bit of the existing customer growth as well as a lot of new logo growth. Speaker 300:37:26And also, the size of some of these deals are larger than what we typically see in our security and our delivery business, which good as well. So I'd say it's a very healthy pipeline and continues to grow. And just across the business, I'd say it's fairly normal in terms of what we're seeing from a pipeline perspective. But the only call out that I would make is API security in particular is extremely strong. We're seeing very, very healthy growth in API security and a lot of demand for API security, especially with our web application firewall customers. Speaker 300:37:58It's a very natural upsell motion. So we're starting to see that pipeline grow significantly and a lot of deals come in as a result as well. Speaker 1100:38:07All right. Awesome. Thank you very much. Operator00:38:10The next question comes from Jonathan Ho with William Blair and Company. Please go ahead. Speaker 500:38:18Hi. Good afternoon. I wanted to follow-up on that last comment around the security business. Can you maybe speak to what's driving the demand for both API and micro segmentation security? And maybe why are we not seeing stronger security revenue growth? Speaker 500:38:35I know there's some legacy security components that are tied to delivery, but just wanted to maybe parse this a little bit and help us understand how the other two segments are performing. Speaker 200:38:47Yeah. You know, there's a lot of greenfield in, both, API security and micro segmentation. And, you know, customers are now realizing they need to have security solutions there. You know, most major enterprises, literally a thousands of APIs exposed, and they don't have a good handle on what they are and what the vulnerabilities are, and that's we provide, the visibility and also the security. We have the market leading solution to do that, and so there is a lot of demand. Speaker 200:39:23You know, the same thing for micro segmentation, in some sense, more important. You know, the attack rates have gone up, the successful penetrations have gone up quite a bit, the damage from ransomware, as we talked about on the call, is extraordinary, incredibly expensive, And again, we've got the market leading solution with Gardacor. And so we are seeing very strong demand there and strong growth. Off of a nontrivial number, you know, we're looking at 30 to 35%, you know, ARR growth coming off, you know, over a quarter billion ending last year. And so, yeah, good reasons for the demand. Speaker 200:40:04And, of course, you think about the impact of Gen AI, one of the sort of bad impacts in general is that it really aids the attackers. And so I think that's part of why you're seeing so many more penetrations today. And micro segmentation is your last and best line of defense, and we've got an exceptional track record of protecting our customers there. And so I think that's why you're seeing the growth. Now, those are, you know, decent sized products now growing rapidly, but the overall security number, you know, running now at about 2,200,000,000.0, has a very large component from, you know, web app firewall, you know, our Prolexic DDoS solution, bot management, you know, WAF and and the scrubbing solutions have been, you know, out there for a while. Speaker 200:40:54They are growing, but at a slower rate. And so you have a slower rate of growth on, you know, a good sized chunk of the 2,200,000,000. And so that's why you don't, you know, see security as a whole growing, you know, at 20 or 30%. You know, it's growing in double digits, but, you know, we're we're looking more like 10% for now. Now, as you see API security and micro segmentation get bigger, then that 30% plus growth rate has more of an impact on the whole number. Speaker 500:41:29Great. And maybe just as a follow-up, with your AI commentary, what kind of opportunity are you seeing there? And how do your solutions maybe compare with some of your major competitors, you know, that are, you know, really focusing on, you know, AI security and infrastructure? Thank you. Speaker 200:41:46Yeah. So, you know, we have a leading capability. It's very early days, of course, you know, for AI firewall. Now, of course, the first thing, there's a lot of new applications out there which need regular security protection, API security and web app firewall. And so that's helping, you know, certainly the AI security business. Speaker 200:42:05But a firewall AI in particular needs extra firewall capabilities to keep adversaries from successful prompt injection attacks, to keep the AI from doing something that it's not supposed to do. And so we developed a a very compelling capability there, just released. It's very early to market. And, you know, very good interest, you know, strong dozens of, you know, proofs of concept underway now and very positive customer feedback. And so it's really kind of it's unique in in the marketplace to protect the customer facing, the user facing AI application against those kinds of attacks. Operator00:42:52The next question comes from Sanjit Singh with Morgan Stanley. Please go ahead. Speaker 1000:42:59Hi, guys. This is John Eisensen on for Sanjit. Thank you for taking my question. Great to see the solid results this quarter. And sorry if I missed this, but can you talk about the how much Edgeo contributed to your revenue in the quarter and how that's tracking relative to the 85,000,000 to $105,000,000 range you gave previously? Speaker 1000:43:21Thank you. Speaker 200:43:22Yes, this is Ed. Speaker 300:43:23So we it gets a lot harder to track the exact contribution from Edge O just given that there is a lot of customer overlap. So as you have some of your larger customers that are growing, see we saw a great traffic growth in video and software download, which drove upside in traffic. Hard to say how much of that's related to Edgeo versus what's related to Akamai. But I would say in general, the Edgeo acquisition is tracking just as we had hoped. And obviously, the category of overall delivery is doing better. Speaker 300:43:53So you could probably assume we're doing a little bit better kind of on the higher end of that range perhaps. But we're also starting to see some upsell of some of the new customer logos that we acquired as well. So I would say the thesis that we had in doing that acquisition is playing out just like we had hoped. We are seeing better trends in the industry, as Tom mentioned, both with pricing and with traffic growth. So again, I don't have an exact number for you because it gets very hard to track the exact number, but I'd say it's tracking along just as we had hoped, maybe even a little bit better. Speaker 1000:44:26Understood. Very helpful. Thank you. Operator00:44:30The next question comes from Jeff Van with Craig Hallum. Please go ahead. Speaker 1200:44:37Hey, Tom, Ed. This is Daniel Hibschman on for Jeff Van Rhee. Just on the delivery, another great quarter and another question on that. Just to set the stage, I think on delivery, we haven't had a sequential growth quarter other than obviously Q4 is show growth seasonally, but we haven't had outside of Q4 is a sequential growth quarter since as I see Q2 twenty twenty. So now Q1 twenty twenty five, Q2 twenty twenty five, we had two sequential growth quarters. Speaker 1200:45:09Really great to see that trajectory very, very different from what we've seen for years and trying to understand a little bit better. I mean, I assume on Q1 twenty twenty five, you have a full quarter of AGEO. So that's the driver. But for this quarter, is there anything about AGEO leading into Q2 inorganically that's benefiting the quarter? I mean, in terms of the market landscape in a really a more significant way to call out? Speaker 1200:45:35Or is this something onetime about what we're seeing here? Speaker 300:45:39Yeah. So I'd say it's a couple of things. One, it's not an NGO onetime item or anything like that because you're correct. By we migrated that traffic very, very quickly. That was one of the benefits of that. Speaker 300:45:50We were able to migrate that over very, very quickly in the first quarter. Actually, January, we were or mid January, we're done. So you don't have any sort of inorganic contribution per se related to Edgeo. The really the if I look at the traffic growth that was surprising to us, it was higher than expected and not quite back to the, you know, what we used to see sort of pre pandemic, but much healthier traffic growth. And it was across a couple different verticals. Speaker 300:46:20And I called out software downloaded video. Video is the biggest category of traffic. So that was good to see. And then we do track a pricing metric where we look at our overall pricing as a whole. We get our traffic revenue over our, you know, our overall traffic and that has continued to moderate. Speaker 300:46:40It's still declining as Tom mentioned, but it's not declining as rapidly as it has. And those are the two ingredients you need for a healthier delivery business. So, you know, it could be, you know, just the industry in general is going through, you know, a better time in terms of, you know, popularity of content, that sort of thing. There is a little bit less competition out there now, obviously. But I'd say it's more of a healthier market than we've seen in the last, say, year or two. Speaker 1000:47:10Thanks, Ed. Operator00:47:14The next question comes from Rudy Kissinger with D. A. Davidson. Please go ahead. Speaker 400:47:22Hi. Thanks for taking my question. This is Andres Miranda for Rudy. I just have a quick one. What would have been compute revenue growth if we adjust for the headwind from the legacy compute revenue that you guys transfer to partners? Speaker 400:47:36Is that something you can quantify for this quarter? Speaker 300:47:40Yes. So it wouldn't make a significant difference. Because if you look at just an aggregate, we broke that revenue out for you at the end of the year. It's down slightly. So it would have a very minimal impact. Speaker 400:47:53Sounds good. Thank you. Operator00:48:01Thank you. This concludes our question and answer session. The conference now has concluded. Thank you for attending today's presentation. You may now disconnect. Operator00:48:11Thank you.Read morePowered by